The euro's movements in recent weeks have been unpredictable. The
single currency slumped more than 1% after former Italian Prime
Minister Matteo Renzi announced his resignation following his
crushing defeat in the country's constitutional reform
referendum.

That was expected, but the rapid recovery of the currency, which
actually closed higher the day after the vote, was not.

Parity between the euro and the dollar will be driven by two big
catalysts: European politics, and a strengthening dollar
following the expected rate hike by the US Federal Reserve in
December.

Stock markets

European stock markets took great comfort from the decision,
charging during afternoon trade on the prospect of a reduction in
the scope of QE. Major indexes in the eurozone were largely up 1%
or higher, with Germany's DAX up 1.8%, Spain's IBEX 2.11% higher,
and Italy's FTSE MIB 1.55% in the green.

Here's the scoreboard at the close:

Investing.com

Bonds

The asset class that will be most directly affected by the
extension and shrinking of QE, bonds have seen yields rise on the
ECB's decision. Yields took off soon after the announcement, with
the Italian 10-year yield running up by as much as 15 basis
points to 2.03%. It is has since calmed down and is pretty much
flat on the day.

The story is broadly similar across the board. Yields jumped
after the announcement, but then fell a little. Here's how
Europe's benchmark government debt vessel, the German 10-year,
looks: